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Aviation Fuel Tax Short Sighted

Nov. 24, 2014 – The Greater Oshawa Chamber of Commerce (GOCC) has a serious concern with the government of Ontario’s move in its 2014 budget to phase in an increase of 148% to the province’s aviation fuel tax over the next four years. The first of four one-cent increases took place this past September and will ultimately raise the tax from 2.7 cents to 6.7 cents a litre.

The GOCC stands with other chambers, businesses, airport authorities, municipalities, tourism operators and consumer organizations across the province in opposing this huge increase which is out of step with our neighbouring U.S. states and most of Ontario’s provincial counterparts. The Chamber is asking the government of Ontario to defer any further aviation fuel tax increases until a full study of its economic impacts can be completed with meaningful input from Ontario municipalities, consumer organizations, airports, tourism operators, airlines and other affected parties.The increase in the aviation fuel tax contradicts the interests of Ontarians as it will obstruct job creation, economic growth, trade and the development of Ontario’s vital travel and tourism sectors. The tax increase will impact tourism including hotels, restaurants, travel agents, tour operators, among others who support the tourism industry as well as many industries across Ontario including manufacturers and freight.

 

According to the Canadian Owners and Pilots Association (COPA) the increase will effectively squeeze the personal aviation and flight training sector, decreasing activity and curtailing jobs such as aircraft repair and servicing and flight training. COPA is calling for a full study of its adverse economic impacts on the Ontario economy.

In 2012, the B.C. government eliminated its aviation fuel tax for international flights in recognition of the value of the aviation industry as an economic engine and an enabler of trade, travel and tourism. Since then, it is reported that 22 airlines have added flights to Vancouver, each of which brings new jobs and economic activity. The B.C. government has pointed out that the initial $12-million loss of revenue was superseded by an estimated $20 million in new payroll and consumption taxes in the first year. These are the types of forward-looking policies Ontario needs to create jobs and keep its economic recovery on course.

In a new report by Fred Lazar of the Schulich School of Business at York University finds that increasing the aviation fuel tax in Ontario by 148% could mean a loss of nearly 3,000 jobs, decrease provincial GDP by almost $100 million annually and drive another 400,000 air travellers out of Ontario to neighbouring U.S.- based airports. The study further projects that, over the long term, the catalytic effect of increasing the aviation fuel tax by four cents per litre could cost the province up to $1 billion in lost GDP by 2030.

“Raising the aviation fuel tax will mean lost opportunities for Ontario. Already, jobs and dollars are being lost because of the three million Ontario travellers and more than five million Canadians who choose to drive across the border to fly out of U.S. airports. Sadly, Canadians make up almost 40% of passengers at Buffalo airport and up to 70% at the Niagara Falls, N.Y. airport,” stated Bob Malcolmson, Chamber CEO.

The London Chamber of Commerce has taken a keen interest in the competitiveness of Canadian airports and has always viewed the London International Airport as one of the main drivers in the growth of its city’s and region’s economy. It has learned through its research that travellers in Southwestern Ontario are already more frequently using Detroit’s airport for perceived savings on passenger tickets and the U.S. government spends seven times more on the infrastructure of its airports compared to Canada. Increasing the fuel tax will only exacerbate the leakage of jobs and economy-stimulating spending to the U.S. placing Ontario airports at a huge competitive disadvantage, which is reflected in the price of a ticket.

Clearly, the U.S. government views the aviation sector as an economic generator that stimulates the economy and not as a cash cow from which to milk more money. And, while the Chamber understands the critical importance of funding infrastructure projects across the GTA and elsewhere, measures that diminish the province’s tax competitiveness will hurt job creation and detract from investment. To fund one element of that infrastructure by increasing the taxes applied to another is illogical and unproductive. In other words, there must be better solutions to our infrastructure needs than by negatively impacting an entire sector, particularly one so vital to our economic future.